Crypto community slams WazirX’s 'socialized losses' plan after hack

As WazirX navigates this crisis, the firm faces the challenge of rebuilding trust with its user base and the broader crypto community.

In the aftermath of the recent WazirX hack, which resulted in a $230 million exploit, the cryptocurrency exchange’s proposed solution to address the losses has met significant resistance from its user base. 

The crypto community heavily criticized the firm’s plan, known as the “socialized losses” or 55/45 approach, particularly after a user poll reportedly showed overwhelming disapproval of the measure.

Outrage among users

The proposed 55/45 approach suggested that users could trade only 55% of their assets on the Indian exchange while the remaining 45% would be converted into USDT stablecoin or other tokens. These converted tokens would then be locked on the platform. This decision would apply to all users, regardless of whether the hack affected their funds.

The poll for the 55/45 approach, which began on July 27 and concluded on Aug. 3, revealed a significant backlash against the proposal. Users expressed their frustration and dissatisfaction with the plan, feeling that it unfairly impacted all users rather than specifically addressing those who had suffered losses from the hack.

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One user, identified as @aaakasei, voiced their displeasure on social media, suggesting drastic measures for WazirX’s CEO, Nischal Shetty:

“…My suggestion to Nischal Shetty: dude, just file bankruptcy, delete Twitter, and launch memecoins…”

Another user, @TakaSacca19744, questioned the exchange’s transparency and accountability, asking why it is stalling and unfair to its users by taking too long to provide information and resolve the issue.

Community demands better security

The backlash against the 55/45 approach shows the growing frustration and uncertainty among WazirX users, many of whom cannot withdraw their funds. The exchange’s handling of the hack and subsequent communication has left its entire user base feeling vulnerable and uncertain about the future of their investments.

However, WazirX co-founder Nischal Shetty has since emphasized that the poll was merely a means to solicit community input, not a legally binding decision. The Indian cryptocurrency exchange has also refuted allegations by TruthLabs regarding security vulnerabilities that supposedly resulted in a substantial $230 million hack, denying any lapses in their security measures.

The recent hack on the exchange has prompted the Bharat Web3 Association (BWA) in India to prioritize the development of robust cybersecurity frameworks and enhanced consumer protection protocols within the crypto industry.